Mall seeks tax credit from city

CEBU, Philippines - SM Prime Holdings Incorporated is planning to go to court in order to compel the Cebu City government to give them tax credit amounting to P17.9 million, which represents the excess amusement taxes that it paid last year.

Tax credit is an alternative remedy to a refund of overpaid taxes, which may be applied to offset tax liabilities. Tax credits are granted in lieu of the inability of the government to give cash refund to its tax payers.

Tax Credit Certificates are given in lieu of cash which in turn can be used by the holder to settle his or her obligation with the government.

SM City Cebu mall manager Sherry Tuvilla said in a letter to City Hall that they have already waited for several months after they sent a request for tax credit. 

“Since the two-year prescription period provided by law for us to file the claim for tax credit in court is about to lapse on November 30, 2011 and in proper to protect our rights and interests, we may be compelled to file our claim in court if no resolution of the matter is reached,” Tuvilla said in her letter.

Section 204 of the Tax Code, as amended, empowers the Commissioner of Internal Revenue to credit or refund taxes erroneously or illegally received or penalties imposed without authority, provided that the taxpayer files a written claim for credit or refund within two years after the payment of the tax or penalty.

After it obtained a copy of Tuvilla’s letter, the Cebu City Council had decided to refer the matter to the City Legal Office for study and recommendation.

“May we respectfully follow up the above-mentioned overpayment be applied as tax credits against the amusement taxes due of SMPHI four Cinemas in SM City to commence with the amusement tax remittance for the month of November 2011 and the months thereafter until said amount is fully applied,” Tuvilla said. 

This is in relation to the payment of amusement taxes of SM’s cinemas in the amount of P26,930,181 for the period of September 2009 to June 2010.

Tuvilla said the payment of that amount for amusement taxes for that particular period was made thinking that the law still required them to pay 30 percent of their gross income.

With the enactment of Republic Act 9640, which amended section 140 (a) of the Local Government Code that reduced the rate of amusement taxes, SM’s obligation should be only P8,941,986, which is equivalent to 10 percent of its gross revenue receipts from its movie business.

The amendment of the LGC took effect on September 2, 2009 that provides for the reduction of amusement tax rate to not more than 10 percent of the gross receipts from admission fees.

With this development, SM officials have requested for tax credit from the city of the excess amusement taxes that they had paid to the city amounting to P17,988,195.

Amusement taxes, which is now equivalent to 10 percent of the gross income of the producers of any entertainment activities such as concerts, movies and other related events, is one of the principal revenues of local government units. Some of the movie operators in Cebu City had earlier complained to City Hall because they had experienced a decrease of their income owing also to the rampant selling of pirated movies.

Although selling of pirated products is strictly prohibited by law, but the police and other law enforcement units here are just doing nothing on it claiming that they are not deputized by the Optical Media Bureau, which is directly under the Office of the President. — /NLQ (FREEMAN)